After two years of increased spending, consumers are grappling with challenges such as rising interest rates, dwindling savings, paying off student loans and credit card debt.
“Call it picky, demanding, careful, cautious,” Dana Telsey, CEO of Telsey Advisory Group said Yahoo Finance Live. “It will be careful [holiday] Season.”
JCPenney CEO Marc Rosen told Yahoo Finance that his customers, who typically have an average household income of $75,000, are facing “bills of $700 more per month” compared to two years ago, ” regardless of whether it is fuel prices, rent or groceries.”
Retailers, on the other hand, are faced with declining sales – unless they pull out the voucher books.
Best Buy (BBY), Nordstrom (JWN), Macy’s (M), Kohl’s (KSS) and Target (TGT) all reported year-over-year declines in same-store sales in their latest quarterly results, while value-focused retailer Walmart (WMT ) and TJ Maxx parent TJX Companies (TJX) posted low single-digit gains.
Online or in store, the deals started earlier. Companies like JCPenney, Target, Best Buy, Walmart and Macy’s launched Black Friday-type deals in October and early November.
“Across the border, [retailers] “Everyone is highly promotional to ensure they attract and retain their core customers and are not affected by the ongoing trade-down effect,” Julie Van Ullen, chief revenue officer of Rakuten Rewards, told Yahoo Finance by phone.
Rakuten, a website extension that offers cash back to online shoppers, is giving up to 20% cash back at Nordstrom’s Bloomingdale’s brand and more than a dozen other retailers.
Read more: 6 Ways to Save Money on Your Black Friday Shopping List
In a call with investors, Nordstrom CEO Erik B. Nordstrom said the retailer is using promotions as leverage to increase foot traffic, which has “declined somewhat.”
Special offers like members-only 5x Beauty Rewards drive “additional traffic” and help sign up for loyalty programs, Nordstrom said.
The story goes on
Margaret Sietsema and her daughter Azalea Sietsema shop at a Target store ahead of the Thanksgiving holiday and traditional Black Friday sales in Chicago, Illinois, USA, November 21, 2023. Portal/Vincent Alban (Vincent Alban / Portal)
Where there are bargains, consumers react. Online shoppers spent $63.2 billion from Nov. 1 to Nov. 20, up 5% year over year, according to an e-commerce report from Adobe Analytics.
Deeply discounted categories include electronics (24% off list price), toys (23%), clothing (21%), televisions (19%), appliances (17%), sporting goods (15%) and furniture (13%). .
As a result, online sales for toys are up 76% and sales for home appliances and clothing are up 30% and 22%, respectively, compared to October.
This momentum is expected to continue this week. During Cyber Week – the five-day period between Thanksgiving and Cyber Monday – the industry is expected to see $37.2 billion in online spending, accounting for about 17% of the total holiday season.
TJX Companies CEO Ernie Herrman said in a call with investors that the company is “very well positioned to stay top of mind with consumers this holiday season” as its value perception resonates.
When there is “uncertainty in the macroeconomic environment,” customers expect promotions, Kohl’s CFO Jill Timm said on a call with investors. The chain plans to “really push for promotions in the fourth quarter,” Timm added.
On November 9, 2023, Macy’s 34th Annual Great Tree Lighting Ceremony was held at Union Square in San Francisco, California, USA. (Tayfun Coskun/Anadolu via Getty Images) (Anadolu via Getty Images)
However, when all factors are taken into account, the current advertising landscape isn’t all that far from the norm, according to new Macy’s CEO Tony Spring.
“I’ve been around for 36 years and I haven’t seen a fourth quarter that’s not competitive and not promotional,” Spring said on a call with investors.
However, Macy’s “needs to be flexible and competitive, running promotions as necessary … to close the fourth quarter with an adequate inventory position,” Spring said.
When asked which retailer will come out on top this week, Van Ullen said retailers that stay on the ball and respond quickly to consumer preferences will have the upper hand.
Focusing on real-time data allows “brands and retailers to pivot and operate as nimbly as possible during this time.”
She added: “The best thing we can all do together is to share insights and be flexible to develop strategies that allow retailers to offset inventory gluts.”
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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